Wharton study: GOP tax bill does not pay for itself

Wharton study: GOP tax bill does not pay for itself
© Greg Nash

The University of Pennsylvania's Wharton School has released an analysis of the Republican tax plan that concludes that even under favorable economic conditions the plan will add more than $1 trillion to the national debt.

The analysis released Tuesday by the Penn Wharton Budget Model finds that "even with assumptions favorable to economic growth," the Senate's version of that tax bill would add more than $1.5 trillion to the nation's debt over the next 10 years.

The Wharton model estimates that the plan would add $1.8 trillion to $1.9 trillion in debt even with economic growth. 

"By 2027, under our standard economics assumptions, [gross domestic product] is projected to be between 0.5 percent and 1.0 percent larger, relative to no tax changes. Debt increases between $1.8 trillion and $1.9 trillion, inclusive of economic growth," Wharton's analysis reads.

Republicans have argued that economic projections are missing the mark and that their tax plan will increase economic growth enough to raise government revenue. The bill's centerpiece is a reduction in the corporate tax rate from 35 percent to 20 percent.

On Monday, the Trump administration reiterated its claim that the plan would pay for itself under positive economic growth.

"The Administration has been focused on tax reform and broader economic policies to stimulate growth, which will generate significant long-term revenue for the government,” Treasury Secretary Steven Mnuchin said in a statement.

A few Republican voices have questioned whether the GOP projections are overly optimistic, but Sen. Bob CorkerRobert (Bob) Phillips CorkerSen. Warner to introduce amendment limiting Trump’s ability to revoke security clearances White House weighs clawing back State, foreign aid funding Rand Paul to ask Trump to lift sanctions on Russian leaders MORE (Tenn.), who cited deficit concerns, was the only Senate Republican to vote against the bill in a 51-49 vote.

And Wharton's analysis throws cold water on GOP promises of economic growth as a result of the tax plan.

"Penn Wharton Budget Model’s dynamic analysis projects that The Senate Tax Cuts and Jobs Act increases federal debt in both the short- and long-run relative to current policy. In the near term, there is a small boost to GDP, but that increase diminishes over time," the study's conclusion reads.

President TrumpDonald John TrumpWhite House counsel called Trump 'King Kong' behind his back: report Trump stays out of Arizona's ugly and costly GOP fight Trump claims he instructed White House counsel to cooperate with Mueller MORE graduated from the University of Pennsylvania with a business degree in 1968.